Public Foundation vs Private Foundation

Public and private foundations are two types of charities that must be established as corporations or trusts, a regulatory requirement that ensures their legal and financial accountability, and registered with the Canada Revenue Agency (CRA), a process that provides them with the necessary tax-exempt status.

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What is the difference between a public and private foundation?

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Public Foundation

    · More than 50% of the people who make up the board of directors or trustees are independent of each other or operate at arm's length.

    · It is not permissible for more than 50% of a public foundation's funding to come from one donor or a group of people who do not operate at arm's length. The organization typically receives its funds from a variety of sources.

    · Allocates over 50% of its annual disbursements to other qualified charities.

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Private Foundation

    · More than 50% of the people who make up the board of directors or trustees are related persons or do not operate at arm's length.

     · It is permissible for more than 50% of the funding to come from one donor, family, or group of people who do not operate at arm's length.

     · A private foundation can either engage in its own charitable activities or donate to other qualified charities.

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The key difference between the two types of foundations is the source of their funding and how they operate. A private foundation is typically funded by a single individual or a small group of people, while a public foundation receives donations from a broad range of sources.

As a result, private foundations have more control over their funding and how it is used, while public foundations must distribute most of their funds to other charities.

In conclusion, the difference between public and private foundations lies in their source of funding, their operation, and their tax implications. Both types of foundations play an essential role in supporting charitable causes, and understanding their differences can help donors make informed decisions about where to direct their contributions.

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